Serbian Prime Minister Vojislav Kostunica and President Boris Tadic have demanded his resignation for authorizing a$370 million deal to buy army equipment at allegedly inflated prices.

A government statement said Davinic -- who serves as minister of the union of Serbia and Montenegro -- told the union's president, Svetozar Marovic, that he will quit even though he is innocent.

Serbian officials have accused Davinic of squandering state funds in signing several questionable contracts, includingorders for 500 pilot jackets for an air force of only 75 pilots, 69,000 sets of body armor, and 74,000 helmets for amilitary force of some 28,000 soldiers.